Post - IPO Performance Drivers

Are you regretting your decision to exit on an IPO's listing day with only small profits while it went on to perform exceptionally well? This is a common dilemma for many investors, stemming from uncertainty about whether to hold on to their IPO shares or rake in early gains. Mandar Wagh discusses the fundamental factors crucial for an IPO's long-term success that investors should consider to achieve better profits

We have all been part of conversations about securing IPO allotments, and most of the time the answer is a disheartening 'no. The unfortunate reality is that only a few lucky investors manage to get IPO shares as the demand often far exceeds the number of shares available.

The BSE IPO index has significantly outperformed the Indian benchmarks over various time periods, highlighting the resilience of newly listed companies and robust investor sentiment.

The BSE IPO index is one created by the Bombay Stock Exchange to track the performance of companies that have recently gone public through an Initial Public Offering (IPO). It includes companies listed on the BSE for up to two years post-IPO, calculated based on their free-float market capitalisation. This index serves as a benchmark for investors to gauge the market's response to new IPOs, offering insights into the performance trends of newly listed companies.

A more challenging situation than securing an IPO allotment is deciding what to do next once you have obtained one. Should you hold on to the shares for potential long-term benefits, or should you sell them immediately to capitalise on listing gains? Often, investors eagerly book profits on the IPO listing day, securing considerable gains but potentially missing out on stellar long-term returns if the IPO is truly promising. Here are a few examples of 2024 IPOs wherein exiting on the listing day may have resulted in forfeiting significant future gains by not remaining invested.

While most brokerage houses and analysts provide recommendations before an IPO launches, very few offer guidance on post-IPO performance and the subsequent steps investors should take after a certain period. Let's understand the fundamental factors crucial for an IPO's long-term success and identify what you should continuously monitor to make informed decisions about your investments.